Great Graphic: Central Bank Balance Sheet Changes

This Great Graphic was posted on Sober Look, which got it from Credit Suisse. It shows the change in central bank balance sheets over the past six months. Going forward, the Bank of England has ended its gilt purchase program and the bar to resuming it seems relatively high here in Q1. The pace of BOJ asset purchases may accelerate a bit after the decision to increase it further at the end of last year, though did not do so at its meeting earlier this month. The ECB's balance sheet, as we noted, is poised to shrink further when banks begin repaying part of the second LTRO later in February. It is possible than some of the long-term funding gets shifted to the shorter term repo operations, but the take down at those too have fallen recently. That brings us to the Federal Reserve. The decision to roll the long-term Treasury purchases of Operation Twist into QE3+ at the end of last year means that the pace of expansion of the Fed's balance sheet is set to rise. While many observers will cite this relative and absolute expansion of the Fed's balance sheet as dollar negative, the dollar's weakness is concentrated against the euro and currencies that track the euro, like Denmark, Switzerland (to a less extent) and the Scandi-bloc. Sterling and the dollar-bloc are making new multi-week lows against the dollar and, of course, the yen is the weakest of all.